The 'ad funded' model has taken a bit of a beating this year. The big question is whether it can continue in a recession-hit media world.
Last month Blyk (the ad-funded mobile operator) withdrew their consumer offer and just this week Joost (the online video company) announced that market conditions meant that it too was moving away from a consumer focussed ad-funded model. These were both businesses heralded as at the frontier of the new media world and examples of how an ad-funded business model could be used to deliver new services to consumers on new platforms.
But that model is under severe threat.
Recessionary-driven declines in media spends have driven massive losses and cuts at ITV and focussed attention on the long-term viability of Channel 4. Newpapers too are suffering. And, to put this into a digital context, the first quarter of this year saw a 5% drop decline in online advertising.
So a new model has to be found as only the largest traffic sites can continue a purely ad-funded approach.
Surely it's got to focus on subscriptions. However, the print media industry let the genie out of the bottle with free content - and I think it's hard to see consumers willingness to pay for something that they have considered free for some time - unless there is an industry-wide approach. But who will blink first?
There are some interesting models out there. Spotify the online music service uses a blend of ad-based revenues and a subscription model. However, many people have asked how Spotify can actually make a profit and there is a good interview with Daniel Ek (the Spotify CEO) on TechRadar - although Ek does not directly answer the question as to how its business model really works. The core question for Spotify and others is what % of users will pay the subscription model when the free model is pretty good. The ads aren't really intrusive enough to make me switch to a premium version.
An alternative option is using micropayments for content. Here users buy premium content in return for just a couple of pence. However will users really want to make that 'purchase decision' every time they want to access/read a piece of content? And how will that work practically? The user would already have had to buy-in to the site producing that content and lodged some form of payment (in the same way that works for iTunes). The micropayment model has been mooted for over a decade - but is still not gained much traction. Perhaps the media downturn will see it dusted it off and reconsidered.
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I think the Spotify question is an interesting one since I agree that the free version is not much different from the subscription service. However there is an extra layer involved here, which is an emotional one. Music especially can invoke strong emotions in people and we the public have been wanting to find ways of getting money to the actual artists (rather than the record labels) for years.
Once someone becomes attached to something on an emotional level (how many people have you heard saying how much they love Spotify?) asking them to pay a little becomes much easier.
If Spotify were to declare that they could no longer afford to continue, would you say 'oh well' or dip into your pocket to keep them going? It is my belief that there are easily enough people who like the service enough to want it to continue and will therefore pay a subscription regardless of the small amounts of incentive, and that they will be doing this already.
I was reading about this in relation to Flash Games earlier and I think you might find the following article interesting as well: Flash Love Letter
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